RFID: Barcode replacement comes in from cold

The mandates are coming. The mandates are coming.

Some of the largest commercial outlets in the United States and abroad have established requirements for their suppliers to begin using radio-frequency identification technology before the end of this year. Yet finding a company willing to admit where it stands with RFID is often an exercise in listening to dead air.

With retail giants such as Wal-Mart Stores, Target and German retailer Metro Group, along with the US Department of Defense, requiring their suppliers to use RFID, the technology has rapidly progressed from buzzword fodder to a serious business issue.

Typically, requirements for new technology generate a whirlwind of press releases from companies trumpeting their success in meeting the mandate challenge. But with RFID, which uses chips that carry detailed inventory data and radio-frequency technology to track them, that hasn't been the case.

Most suppliers, when asked about their RFID plans, say they can't show their hands and offer rivals potentially valuable insight into what may become a major competitive differentiator. But some industry watchers say the suppliers' silence is more an indication that they still don't know how to tackle RFID.

Even the companies responsible for much of the attention focused on RFID aren't willing to detail their plans. Both Target and Wal-Mart have remained tight-lipped about their own progress. Joshua Walker, an analyst at Forrester Research, says the silence isn't all that surprising.

"If you're behind the curve, obviously, you'd want to hide that from everyone, especially Wal-Mart and the DOD," he said.

Waiting for results
Walker compares the situation to the market for customer relationship management (CRM) software, where companies were reluctant to describe their experiences until they had some success to talk about. And, Walker points out, the software market was more mature when CRM hit several years ago than the RFID segment is today.

"A lot of companies are currently just trying to figure out how the stuff works and, come time for the program reviews by the Wal-Marts of the world, there will still be plenty of smoke screens and showmanship that has to go on for these companies to appear capable of pulling it off," he said.

In fact, according to a study published by Forrester in March, a majority of Wal-Mart's suppliers will not be able to meet the retailer's January 2005 deadline for adopting RFID. In the report, Forrester said it had reduced its estimate of the number of companies it expects to meet Wal-Mart's mandate from an earlier estimate of 60 percent to only 25 percent. Forrester said it based this estimate in part on interviews it conducted with the companies.

Wal-Mart representatives refuted the validity of the study and said they believe that most companies affected by the mandate will, in fact, meet the company's criteria. Wal-Mart has asked its top 100 suppliers to add RFID tags to the cases and containers they ship to the retailer; suppliers were notified of the request in June 2003.

A Wal-Mart representative added that the company has actually had at least 10 additional suppliers volunteer to submit to its RFID adoption schedule. The company did not offer any partners' names for reference, however.

Tom Pounds, vice president of product strategy at RFID hardware maker Alien Technology, said that of the 100 suppliers working with Wal-Mart, few really understand RFID.

"Of the Wal-Mart 100, you have maybe 10 suppliers who are really up-to-speed and have experience, and another 30 to 40 that have some basic understanding of the issues and have worked on it to some extent," Pounds said. "The other half -- these are people who are just getting started and orienting themselves with technologies."